HARBIN, China, Aug. 9, 2011 /PRNewswire-Asia/ -- China Education
Alliance, Inc. ("China Education Alliance" or the "Company") (NYSE:
CEU), a China-based education resource and services company, today
announced second quarter 2011 results. The Company will host
a conference call on Wednesday, August 10,
2011, at 8 a.m. EDT or
8 p.m. Harbin time.
Financial Highlights for the Second Quarter ended June 30,
2011
- Total revenue decreased 10.2% year-over-year to $9.7 million.
- Gross profit declined to $7.0
million, or to 71.2% of sales, compared to $9.1 million, or to 83.4% of sales during the
same period in 2010.
- On a GAAP-basis, net income was $1.9
million compared with net income of $4.3 million during the same period in 2010.
- Non-GAAP net income was $3.0
million compared with non-GAAP net income of $4.4 million in the second quarter of 2010.
Non-GAAP fully diluted earnings per share were $0.10, compared with EPS of $0.14 per fully diluted share in the second
quarter of 2010.
"We are encouraged by the early signs of an improvement in our
business following the baseless allegations made against the
Company at the end of last year. The strategic promotional and
marketing campaigns that we implemented in response to the
allegations have been successful in restoring our reputation," said
Xiqun Yu, Chairman and Chief
executive Officer of China Education Alliance. "We continue to
execute on our strategy of acquiring businesses to explore our
educational platform."
Second Quarter 2011 Review
China Education Alliance reported total revenue of $9.7 million for the second quarter ended
June 30, 2011, a decrease of
$1.1 million or 10.2%, compared to
revenues of $10.9 million for the
second quarter of 2010. Revenues for the training center increased
51.5% to $4.4 million but were offset
by a 39.0% decline on online education revenues to $4.5 million. The decrease was due to the
negative allegations mentioned above which was offset by the
positive contributions of recent acquisitions. Other revenues
increased 45.0% to $0.8 million
compared with $0.5 million during the
period ended June 30, 2010.
Overall cost of sales increased to $2.8
million in the second quarter of 2011, compared to
$1.8 million for the second quarter
of 2010. The increase was mainly due to continuous amortization of
prepaid class materials.
Gross profit was $7.0 million in
the second quarter 2011 compared with $9.1
million for the second quarter of 2010. As a percentage of
sales, gross margin was 71.2% during the quarter, compared with
83.4% in the second quarter of 2010.
Gross profit in the online division decreased to $3.0 million compared with $6.3 million in the comparable period of 2010, or
to 66.6% as a percent of sales in the second quarter of 2011 from
84.7% in the same period of 2010 due to lower online revenues and
higher costs. Gross profit for the training center increased 44% to
$3.3 million compared with
$2.3 million during the second
quarter of 2010. However, gross margin as a percentage of sales in
the division decreased to 74.4% from 78.5% during the second
quarter of 2010 due to higher amortization charges. Gross
profit for other revenues increased 33% to $0.7 million. Gross margin in the segment was
85.5% versus 93.1% during the second quarter of 2010.
Selling expenses decreased 10.3% to $3.1
million from $3.5 million. As
a percentage of sales, selling expenses remained flat at 31.1% of
sales.
Administrative expenses increased to $1.2
million for the second quarter of 2011 compared with
$0.6 million for the second quarter
of 2010. Depreciation and amortization increased to $0.4 million, up from $0.3
million during the second quarter of 2010.
During the quarter, the Company disposed of one training center
building and other fixed assets after evaluating the lack of
profitability of the location. The total disposal loss and loss of
other fixed assets was $0.5 million
which was recorded under other income and expenses.
Net income was $2.0 million, or
$.06 per share, basic and diluted,
for the second quarter as compared with net income of $4.3 million, or $0.14 per share, basic and diluted, during the
second quarter of 2010.
On a non-GAAP basis, net income was $3.0
million in the second quarter of 2011, or $0.10 per fully diluted share as compared with
non-GAAP net income of $4.4 million,
or $0.14 per fully diluted share for
the second quarter of 2010.
Recent Developments
During the quarter, the Company acquired Nuoya Foreign Languages
School (a.k.a. "Noah International"), the largest
multi-language learning institute in Northern China offering courses in English,
Japanese, Korean, Russian, German, French, Spanish, Italian,
Arabic, etc., for RMB 16 million in
cash. Currently, Noah International serves a student body of
roughly 1,000 students with its two training centers in
Harbin and Changchun, and generates annual revenue of
RMB 10 million and net profit of
RMB 3 million.
The Company was also notified by the New York Stock Exchange
("NYSE") that it was not in compliance with the NYSE continued
listing standard requiring a listed security to maintain a minimum
average closing price of $1.00 per
share over a consecutive 30-trading-day period. The Company has six
months from receipt of the notification to bring its share price
and average share price back above $1.00.
Business Outlook
China Education Alliance continues to execute its strategy to
augment its National Expansion Plan with the completion of several
acquisitions.
During the quarter, the Company established a new Board of
Directors following its purchase of a 60% interest in Harbin
Tianlang Culture and Education School. The Company appointed three
out of the five new directors and co-manages the school with the
previous majority owner.
In June, the Company also acquired the aforementioned, Noah
International, for RMB16 million in
cash. Its financial statement was been consolidated with the
Company's balance sheets as of May
2011.
"We continue to identify opportunities to expand our platform
with quality businesses that fit our overall business strategy. We
are pleased that our recent acquisitions positively contributed to
sales in the current quarter," said Chairman Yu.
2011 Guidance
The Company reiterates that it expects full year 2011 total
revenues to be between $47 million and $52
million.
Financial Position
As of June 30, 2011, China
Education Alliance had approximately $72.6
million cash and cash equivalents, an increase from
$71.1 million at December 31, 2010. Working capital was
$72.4 million, a decrease of
$0.2 million from working capital of
$72.6 million at December 31, 2010. The Company believes that
current working capital and borrowing capabilities are adequate to
cover its planned operating and capital requirements. Cash provided
from operating activities was $6.3
million for the six months ended June
30, 2011, compared with cash provided from operating
activities of $10.1 million for the
six months ended June 30,
2010.
Conference Call
China Education Alliance will host a conference call and live
webcast at 8 a.m. Eastern Daylight
Time (EDT) (8 p.m.
Harbin/Beijing time on Wednesday, August 10, 2011).
The dial-in details for the live conference call are as
follows:
- Participant Dial In (Toll Free
USA): + 1-866-770-7051
- International Dial In: +1-617-213-8064
- China Toll Free:
+86-108008521490
- Hong Kong Toll Free: +852-3002-1672
Passcode: CEU
A live webcast of the conference call will be available on the
investor relations section of the Company's website at:
http://www.chinaeducationalliance.com. A telephone replay of the
call will be available for seven days after the conclusion of the
conference call. The dial-in details for the replay are as
follows:
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- U.S. Toll Free
Number:
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+1-888-286-8010
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- International dial-in number:
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+1-617-801-6888
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Passcode:
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32845653
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About China Education Alliance, Inc.
China Education Alliance, Inc.
(http://www.chinaeducationalliance.com) is a fast-growing, leading,
China-based company offering high-quality education resources and
services to students ages 6 to 18 and adults (university students
and professionals) ages 18 and over. For students ages 6 to 18,
China Education Alliance offers supplemental, online exam-oriented
training materials and onsite, exam-oriented training and tutoring
services. The company provides online, downloadable resources
prepared by distinguished teachers and onsite, personalized
instruction. All resources and tutoring services are provided by
distinguished teachers within mainland China. The purpose of online
exam-orientated resources and onsite tutoring is to help Chinese
students (ages 6 to 18) pass the two most important and highly
competitive exams in their educational career: the senior high
school entrance and college entrance exams. For graduates and
professionals age 18 and over, China Education Alliance provides
vocational training including IT and several professional training
programs.
Forward-Looking Statements
Statements contained in this press release, which are not
historical facts, are forward-looking statements as that term is
defined in the Private Securities Litigation Reform Act of 1995.
These statements include, but are not limited to, expectations of
signing new customers and contracts, developing new products,
projected revenues and earnings, and the success of new products.
These forward-looking statements are based largely on current
expectations and are subject to a number of known and unknown
risks, uncertainties and other factors beyond our control that
could cause actual events and results to differ materially from
these statements. These statements are not guarantees of future
performance, and readers are cautioned not to place undue reliance
on these forward-looking statements, which are relevant as of the
date of the given press release and should not be relied upon as of
any subsequent date. China Education Alliance undertakes no
obligation to update the forward-looking information contained in
this press release.
For more information, please contact:
China Education Alliance, Inc.
Alice Lee Rogers, CFO
Tel: +1-626-379-5956
Email: alice@edu-chn.com
Christensen
Jenny Wu
Telephone: +86 10 5826 4939
Email: jwu@christensenIR.com
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China
Education Alliance, Inc. and Subsidiaries
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Consolidated
Statements of Operations
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(Unaudited)
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Three months
ended
|
|
Six months
ended
|
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|
June 30,
2011
|
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March 31,
2011
|
|
June 30,
2010
|
|
June 30,
2011
|
|
June 30,
2010
|
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|
Revenues
|
|
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|
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|
|
|
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|
Online education
revenues
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$4,506,649
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$3,923,588
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$7,386,469
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$8,430,237
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$12,617,532
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Training center
revenues
|
4,443,432
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|
3,026,843
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2,932,222
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7,470,275
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5,789,419
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Other Revenues
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773,027
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|
49,973
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|
533,405
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|
823,000
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|
1,062,879
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|
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Total revenue
|
9,723,108
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|
7,000,404
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|
10,852,096
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|
16,723,620
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|
19,469,830
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Cost of Goods Sold
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Online education
costs
|
1,507,330
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1,693,222
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1,128,927
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3,200,552
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2,242,485
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Training center costs
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1,138,760
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676,116
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630,956
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1,814,876
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1,262,925
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Other costs
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112,299
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8,079
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|
37,060
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120,378
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|
77,837
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Total cost of goods
sold
|
2,758,389
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|
2,377,416
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|
1,796,943
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|
5,135,806
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3,583,247
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Gross Profit
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Online education gross
profit
|
2,999,319
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|
2,230,366
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6,257,542
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|
5,229,685
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|
10,375,047
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Training center gross
profit
|
3,304,672
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|
2,350,726
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|
2,301,266
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|
5,655,399
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|
4,526,494
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Other gross profit
|
660,728
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|
41,895
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|
496,345
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|
702,622
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|
985,042
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Total gross profit
|
6,964,719
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|
4,622,987
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|
9,055,153
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|
11,587,815
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|
15,886,583
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Operating Expenses
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Selling expenses
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3,117,607
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2,426,297
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3,478,810
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5,543,904
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5,719,764
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Administrative
|
1,237,904
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|
2,449,891
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572,847
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3,687,795
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|
1,027,040
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Depreciation and
amortization
|
405,107
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317,862
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264,663
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|
722,969
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|
497,474
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Total operating
expenses
|
4,760,618
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|
5,194,050
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|
4,316,320
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|
9,954,668
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|
7,244,278
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|
|
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|
　
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|
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|
|
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Income/(Loss) from
operations
|
2,204,101
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|
(571,063)
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|
4,738,833
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|
1,633,146
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|
8,642,305
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|
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|
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Other Income/
(Expense)
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Other
income/(Expense)
|
(10,164)
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|
(59,856)
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|
2,245
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|
(70,020)
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|
21,138
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Loss on disposal of fixed
assets
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(499,532)
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(141,912)
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-
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(641,444)
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-
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|
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Interest income
|
80,661
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|
62,459
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|
50,842
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|
143,120
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|
97,535
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Investment loss
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-
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-
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(6,076)
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-
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(7,606)
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Total other
income/(Expense)
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(429,034)
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(139,309)
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|
47,011
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(568,343)
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|
111,067
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Net Income Before Provision for
Income Tax
|
1,775,067
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(710,373)
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4,785,844
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1,064,803
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8,753,372
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|
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Income taxes:
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|
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Current
|
344,541
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-
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(549,966)
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|
344,541
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(893,145)
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Deferred
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(71,353)
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|
163,279
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-
|
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91,926
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|
-
|
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|
|
|
|
|
|
|
|
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|
Net Income
|
2,048,254
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|
(547,094)
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|
4,235,878
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|
1,501,270
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|
7,860,227
|
|
|
Net Income attributable to the
noncontrolling interests
|
(128,946)
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|
48,340
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|
21,162
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|
(80,606)
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|
59,685
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|
|
Net Income/(Loss) - attributable
to CEU and Subsidiaries
|
$1,919,308
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($498,754)
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|
$4,257,040
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$1,420,664
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|
$7,919,912
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|
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Basic Earnings Per
Share
|
$0.06
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|
($0.02)
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|
$0.14
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|
$0.05
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|
$0.25
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Diluted Earnings Per
Share
|
$0.06
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|
($0.02)
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|
$0.14
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|
$0.05
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|
$0.25
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|
Basic Weighted Average Shares
Outstanding
|
31,324,823
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30,976,810
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|
31,323,734
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31,273,519
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|
31,323,734
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|
|
Diluted Weighted Average Shares
Outstanding
|
31,324,823
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|
30,976,810
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|
31,363,255
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|
31,273,519
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|
31,377,877
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The Components of Other
Comprehensive Income
|
|
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|
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Net income/(Loss)
|
$1,919,308
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|
($498,754)
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|
$4,257,040
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|
$1,420,664
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|
$7,919,912
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|
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Foreign currency translation
adjustment
|
1,028,559
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|
522,060
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|
242,100
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|
1,550,619
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|
169,665
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|
|
|
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|
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|
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|
|
Comprehensive income
|
$2,947,867
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|
$23,306
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|
$4,499,140
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|
$2,971,282
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|
$8,089,577
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|
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|
|
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|
|
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|
China
Education Alliance, Inc. and Subsidiaries
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Consolidated
Balance Sheets
|
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(Expressed
in US Dollars)
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|
As at
December 31, 2010 and June 30, 2011
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June
30,
|
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December
31,
|
|
|
2011
|
|
2010
|
|
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(Unaudited)
|
|
(Audited)
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ASSETS
|
|
|
Current Assets
|
|
|
|
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|
Cash and cash
equivalents
|
$
72,643,017
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|
$
71,105,415
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|
|
Accounts receivable
|
127,340
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|
-
|
|
|
Other receivable
|
393,536
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|
432,030
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|
|
Prepaid expenses
|
2,197,498
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|
2,834,976
|
|
|
Total current
assets
|
75,361,392
|
|
74,372,421
|
|
|
|
|
|
|
|
Non-current Assets
|
|
|
|
|
|
Note receivable
|
7,349,528
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|
7,172,301
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|
|
Property and equipment,
net
|
6,531,891
|
|
9,946,729
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|
|
Intangibles and capitalized
software, net
|
12,908,169
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|
1,515,381
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|
|
Long-term investment
|
-
|
|
559,269
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|
|
Deferred tax assets
|
441,464
|
|
-
|
|
|
Total non-current
assets
|
27,231,052
|
|
19,193,680
|
|
|
|
|
|
|
|
Total Assets
|
$
102,592,444
|
|
$
93,566,101
|
|
|
|
|
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|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
Accounts payable and accrued
expenses
|
$209,952
|
|
$
686,102
|
|
|
Deferred revenues
|
2,658,865
|
|
1,072,373
|
|
|
Total current
liabilities
|
2,868,817
|
|
1,758,475
|
|
|
|
|
|
|
|
Stockholders'
Equity
|
|
|
|
|
|
Common stock ($0.001 par value,
150,000,000 shares authorized,31,747,249and 31,261,911 issued at
June 30, 2011 and December 31, 2010, respectively; and
412,536 shares held in
treasury)
|
|
|
|
|
|
|
|
|
|
31,747
|
|
31,263
|
|
|
Additional paid-in
capital
|
40,864,105
|
|
39,705,625
|
|
|
Statutory reserve
|
5,063,769
|
|
3,731,672
|
|
|
Retained earnings
|
44,760,739
|
|
44,591,566
|
|
|
Accumulated other comprehensive
income
|
7,124,184
|
|
5,573,565
|
|
|
Less: Treasury stock
|
(977,072)
|
|
(977,072)
|
|
|
Stockholders'
equity - China Education
Alliance, Inc. and Subsidiaries
|
96,867,471
|
|
92,656,619
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|
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Noncontrolling interests in
subsidiaries
|
2,856,156
|
|
(848,991)
|
|
|
Total
stockholders' equity
|
99,723,627
|
|
91,807,627
|
|
|
|
|
|
|
|
Total Liabilities and
stockholders' Equity
|
$
102,592,444
|
|
$
93,566,101
|
|
|
|
|
|
|
|
|
|
|
China
Education Alliance, Inc. and Subsidiaries
|
|
|
Consolidated
Statements of Cash Flows
|
|
|
(Expressed
in US Dollars)
|
|
|
As
at June 30, 2010
and 2011
|
|
|
Six Months
Ended June 30,
|
|
|
2011
|
|
2010
|
|
|
Cash flows from operating
activities
|
|
|
|
|
|
Net Income
|
$
1,501,270
|
|
$
7,860,227
|
|
|
Adjustments to reconcile net
income to net cash provided by Operating
activities
|
|
|
|
|
|
Depreciation and
amortization
|
722,969
|
|
497,474
|
|
|
Depreciation and
amortization-Cost of goods sold
|
915,447
|
|
416,180
|
|
|
Loss on disposal of fixed
asset
|
641,444
|
|
-
|
|
|
Stock based
compensation
|
1,158,965
|
|
157,730
|
|
|
Loss on equity
investment
|
-
|
|
8,174
|
|
|
Deferred tax asset
|
(441,464)
|
|
-
|
|
|
Net change in assets and
liabilities
|
|
|
|
|
|
Account receivables
|
(120,542)
|
|
(272,210)
|
|
|
Prepaid expenses and
other
|
701,043
|
|
713,278
|
|
|
Accounts payable and accrued
liabilities
|
(297,760)
|
|
919,764
|
|
|
Other receivable
|
97,732
|
|
-
|
|
|
Deferred revenue
|
1,378,346
|
|
(165,976)
|
|
|
Net cash provided by operating
activities
|
6,257,450
|
|
10,134,641
|
|
|
|
|
|
|
|
Cash flows from investing
activities
|
|
|
|
|
|
Proceeds from disposal of fixed
assets
|
1,772,265
|
|
(110,111)
|
|
|
Cash used for
acquisitions
|
(7,788,424)
|
|
(876,395)
|
|
|
Net cash used in investing
activities
|
(6,016,159)
|
|
(986,506)
|
|
|
|
|
|
|
|
Cash flows from financing
activities
|
|
|
|
|
|
Warrants exercised
|
-
|
|
298,749
|
|
|
Options exercised
|
-
|
|
38,657
|
|
|
Net cash provided by financing
activities
|
-
|
|
337,406
|
|
|
|
|
|
|
|
Effect of exchange rate changes
on cash
|
1,296,311
|
|
169,665
|
|
|
|
|
|
|
|
Net increase in cash
|
1,537,602
|
|
9,655,206
|
|
|
|
|
|
|
|
Cash and cash equivalents at
beginning of period
|
71,105,415
|
|
65,035,332
|
|
|
|
|
|
|
|
Cash and cash equivalents at end
of period
|
$ 72,643,017
|
|
$ 74,690,538
|
|
|
|
|
|
|
|
Supplemental disclosure of cash
flow information
|
|
|
|
|
|
Income taxes paid
|
$
2,187,294
|
|
$
2,719,163
|
|
|
|
|
|
|
|
Non-cash investing and financing
activities
|
|
|
|
|
|
Conversion of preferred stock to
common
|
$
-
|
|
$
1,867,644
|
|
|
|
|
|
|
|
SOURCE China Education Alliance, Inc.